BLBG:Dollar Rises on China Slowdown Concern, Asian Stock Loss
The dollar rose for the first time in four days against the euro after BHP Billiton Ltd. (BHP) said China’s steel production is slowing, boosting demand for the relative safety of the U.S. currency.
The greenback strengthened against all of its 16 major counterparts, with the biggest gains versus Asia-Pacific region currencies such as the New Zealand and Australian dollars. The U.S. currency also advanced as stocks declined around the world, spurring investor appetite for safer securities. The euro also weakened against the dollar as a report showed German producer prices rose at a slower pace last month.
“Worries about a slowdown in the Chinese economy, that’s affecting risk” and boosting the dollar, said Geoffrey Yu, a currency analyst at UBS AG in London. “Yes the U.S. may be recovering but with the rest of the world in a slowdown, how beneficial is that going to be?”
The dollar strengthened 0.3 percent to $1.3205 per euro at 7:34 a.m. in New York after dropping 1.6 percent during the previous three days. The greenback climbed 1.1 percent to 81.71 cents versus New Zealand’s currency, and 1 percent to $1.0498 per Australian dollar. The dollar appreciated 0.5 percent to 83.73 yen.
BHP, whose biggest customer is China, is re-evaluating spending plans amid slowing Chinese growth, the Australian Financial Review reported today, citing comments by Chairman Jacques Nasser to investors.
Dollar Index
China’s Premier Wen Jiabao this month announced an economic growth target of 7.5 percent for this year, down from an annual 8 percent over the past seven years. Steel output growth in China, the biggest producer, may slow to 4 percent this year, the China Iron and Steel Association said March 6.
“Comments from BHP and Rio Tinto talking about a slowdown in China are hurting commodity currencies led by the Australian dollar,” said Tim Kelleher, Auckland-based head of institutional foreign-exchange sales at ASB Institutional, a unit of Commonwealth Bank of Australia. (CBA) “The U.S. dollar and yen are rallying.”
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, rose 0.3 percent to 79.69.
The euro fell against the greenback and pound as concern mounted about European economic growth. The Netherlands today increased its 2013 budget deficit forecast to 4.5 percent of gross domestic product from a previous estimate of 4.6 percent.
German Inflation
The German Federal Statistics Office said today that producer prices climbed 0.4 percent from January, when they gained 0.6 percent. The median estimate in a Bloomberg News survey of analysts called for an increase of 0.5 percent.
The pound strengthened against most of its 16 major peers tracked by Bloomberg after U.K. data showed inflation slowed less than economist estimates in February. Consumer prices rose 3.4 percent from a year earlier, compared with the 3.3 percent median estimate of 36 economists in a Bloomberg survey.
Sterling advanced most against the New Zealand and Australian dollars. It was only weaker versus the dollar, Brazilian real and Taiwanese dollar.
The euro may weaken to an 18-month low against the pound after falling below a key level of so-called support, Commerzbank AG said, citing trading patterns.
Outlook ‘Bearish’
The 17-nation currency last week dropped through the 55-day moving average, currently at 83.46 pence per euro, and is now poised to weaken beyond the January low of 82.21 pence, Karen Jones, head of fixed-income, commodity and currency technical analysis in London, wrote in a research report.
“Euro-pound has eroded the two-month uptrend, currently at 83.20 pence, but seen no follow through on the downside,” Jones wrote. “The longer-term outlook will remain bearish with a drop below the January low of 82.21 being on the cards.”
The euro fell 0.1 percent to 83.22 pence, after declining to 82.84 pence yesterday, the weakest since Feb. 16. The last time the currency dropped below 82.21 pence was Sept. 10, 2010.
The dollar has gained 1.2 percent in the past month according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro advanced 0.8 percent, the pound rose 1.3 percent and the yen weakened 4.3 percent, the indexes show.
Implied volatility of three-month options of Group of Seven currencies rose to 10.01 percent, snapping a three-day drop. It reached 10.72 last week, its highest level since Feb. 16, according to the JPMorgan G7 Volatility Index.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
